Twitter asks banks about Musk’s efforts to undermine  billion deal

Twitter asks banks about Musk’s efforts to undermine $44 billion deal

Elon Musk’s Twitter profile is seen on a smartphone placed on a printed Twitter logo in this April 28, 2022 photo image. REUTERS/Dado Ruvic/Illustration

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WILMINGTON, Del., Aug 2 (Reuters) – Twitter Inc ( TWTR.N ) is trying to find evidence that Elon Musk tried to torpedo the financing of a $44 billion takeover deal for his social media company and is also scrutinizing his motivations for backing it. Outside the agreement, legal experts.

Twitter this week sent dozens of civil subpoenas to global banks such as units of Morgan Stanley ( MS.N ), co-investors in the deal and Musk advisers, including affiliates of Brookfield Asset Management Inc ( BAMA.TO ), according to filings. Over the past two days in the Delaware Court of Chancery.

Morgan Stanley declined to comment. Brookfield did not immediately respond to a request for comment. Representatives for Musk and Twitter could not be reached.

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The subpoenas seek documents and communications related to the contract, its financing, any information related to the “bot,” or fake, Twitter account. They also want information on how recipients could potentially influence the deal from changes in the stock price of electric car maker Tesla Inc ( TSLA.O ), of which Musk is chief executive.

The subpoenas are part of Musk’s lawsuit against Twitter that seeks to hold him to the $54.20 per share deal he agreed to. A five-day trial will begin Oct. 17 in Delaware Chancery Court.

Experts said the subpoenas indicate Twitter wants to know what lenders, investors and advisers are telling each other about Musk’s behavior after signing the deal in late April.

“They suspect that behind the scenes he’s conspiring to blow the whole thing up,” said UConn School of Law professor Minor Myers.

Musk said on July 8 that he was pulling out of the deal after Twitter alleged that the platform violated the deal by withholding data from fake accounts. Twitter says the fake accounts are a distraction from the only important thing, which is the terms of the agreement. Musk also said he was stepping down because Twitter had fired high-ranking executives and one-third of its talent acquisition team, violating Twitter’s obligation to “maintain substantially intact the constituent elements of its current business organization.” Read more

Kasturi cannot be ordered to terminate the deal if the funding fails — unless he caused the failed funding, according to legal experts.

Twitter’s subpoenas focused on what they said was Bob Swan, an operating partner at venture capital firm Andreessen Horowitz, who initially led Musk’s efforts to finalize the deal’s financing. He was replaced by Antonio Gracias, a longtime Musk associate, according to Twitter’s lawsuit.

Boston College Law School professor Brian Quinn said Twitter seemed to want to know “whether Gracias had a role in getting the financing done or whether he was supposed to slow things down.”

Swan did not immediately respond to messages sent via LinkedIn and to Andreessen Horowitz. Gracias did not respond to a request for comment sent to his Valor Equity Partners firm.

Experts said Twitter would be interested in understanding lenders’ concerns about the number of fake accounts on the platform and whether it was a problem for them, as Musk suggested.

Those close to Musk were asked to communicate with investors about the Twitter deal, including Steve Jurvetson, a former Tesla board member and current director of SpaceX, the private rocket company founded and led by Musk.

Jurvetson did not immediately respond to a request for comment sent to his Future Ventures firm.

“Hal, lawyers w/ TWTR @elonmusk sending out subpoenas to ecosystem friends,” co-founder of Palantir Technologies Inc ( PLTR.N ) wrote on Twitter. “I had nothing to do with it except for a few odd comments, but received the ‘You Ordered Here’ document notice,” he wrote.

He called Twitter’s subpoena a “massive harassing fishing operation.”

Lonsdale did not immediately respond to a request for comment sent to his 8VC firm.

Theodore Kittila, a Delaware corporate litigator, said Twitter is trying to determine what Musk was saying privately when he tweeted publicly that he was concerned about bots and fake accounts on Twitter.

“They’re trying to climb up there, behind the tweets,” Kittila said. “They’re looking at emails and trying to divine what actually happened and what led to the decision to suspend his contract.”

Musk sent his own subpoenas over the past two days to Concentric Solutions Corp ( CNXC.O ), a data analytics firm, and TaskUs USA ( TASK.O ), which controls content. Musk’s subpoena questions were filed under seal.

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Reporting by Tom Hulse in Wilmington, Delaware; Editing by Leslie Adler

Our standards: Thomson Reuters Trust Policy.

Tom Hulse

Thomson Reuters

The award-winning reporter covers US courts and law from the COVID-19 pandemic to high-profile criminal trials and Wall Street’s biggest failures with more than two decades of experience in international financial news in Asia and Europe.

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